China's Wuhan Iron & Steel Inc (WISCO) made a nonbinding offer of $400 million for a minority stake in Brazilian miner MMX and its subsidiary MMX Sudeste Mineracao, MMX said on Tuesday in its website.

In the statement, MMX said China’s third largest steelmaker WISCO would purchase, by means of a new issue of MMX common shares, a 9.09% participation in MMX for a total price of $120 million, and would further acquire a 23% equity interest in MMX Sudeste, by means of a new share issue, for the purchase price of US$280 million.

The Rio de Janeiro based MMX said the nonbinding nature of the offer would allow it or Wuhan to withdraw from, and discontinue, the transaction until a mutually agreeable deal is reached.

This is the third deal of WISCO to invest in oversea iron ore miners in 2009.

WISCO signed tender offers agreements with Canadian company Consolidated Thompson (CLM) on June 9 and Australia’s Western Plains Resources (WPG) on June 12.

Under the deal, WISCO will invest $240 million to buy 19.9% of the Canadian company’s stake. It will fund a A$45 mln ($36.12 mln) in exploration costs to develop WPG’s Hawk Nest tenements in South Austria, earning a 50% participating interest from it. WISCO will become WPG’s second largest shareholders through additional stock issue.

The deal with MMX started from a month earlier, when MMX’s Chairman Mr. Eike F. Batista, made a Memorandum of Understanding with WISCO on May 19, establishing the key terms of a potential commercial and strategic partnership. Inside of the five key terms, there are “construction by WISCO of an integrated steel plant at the Açu Super Port Industrial District, with an estimated capacity of 5 million tons of steel products per year” and “the acquisition by WISCO of an equity interest in MMX and/or MMX Sudeste”.

Insiders from WISCO confirmed that “the steel plant will be built in Rio de Janeiro, controlled and run by WISCO”.

Local newspaper in Brazil reported that the steel plant will cost four bln US dollars.

“In view of the current productivity, Wugang will get 20 mln tons of ore from Canada’s CLM, Australia’s WPG andBrazil’s MMX, accounting for 30% to 40% of the total need of headquarter, Wugang.” The insider said. “Wugang will be able to deliver goods in the first half of 2010 at the earliest,” he added.

However, the insider also noted that “Australia has advantages in the deals because of the low ocean freight, despite that the production cost is lower in Canada.” He said WISCO hopes to make more breakthrough in Austrilia.

(A$1 = $0.8027)

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